DigitalOcean(DOCN) - 2025 Q1 - Quarterly Report

Revenue and Customer Growth - Revenue from Higher Spend Customers accounted for 88% of total revenue as of March 31, 2025, up from approximately 87% as of March 31, 2024[102]. - The number of Higher Spend Customers increased to approximately 171,000 as of March 31, 2025, compared to approximately 157,000 as of March 31, 2024[102]. - Average Revenue Per User (ARPU) rose from $95.13 in Q1 2024 to$108.56 in Q1 2025[103]. - Revenue for the three months ended March 31, 2025, was $210.7 million, a 14$184.7 million in the same period of 2024, driven by a 14% increase in ARPU to $108.56 from$95.13[140]. Financial Performance - Annual Run-Rate (ARR) increased to $843 million as of March 31, 2025, up from$739 million as of March 31, 2024[103]. - Net Dollar Retention (NDR) improved to 100% in Q1 2025, up from 97% in Q1 2024[107]. - Gross profit margin improved to 61% for the three months ended March 31, 2025, compared to 59% for the same period in 2024[141]. - Adjusted EBITDA for the three months ended March 31, 2025, was $86.3 million, representing a margin of 41$74.3 million and a margin of 40% in the same period of 2024[167]. - GAAP net income attributable to common stockholders was $38.2 million for the three months ended March 31, 2025, compared to$14.1 million in the same period of 2024[171]. - Non-GAAP net income for the three months ended March 31, 2025, was $55.4 million, up from$42.7 million in the same period of 2024[171]. - GAAP diluted net income per share increased to $0.39 for the three months ended March 31, 2025, from$0.15 in the same period of 2024[171]. - Non-GAAP diluted net income per share was $0.56 for the three months ended March 31, 2025, compared to$0.43 in the same period of 2024[171]. Expenses and Cost Management - Sales and marketing expenses were approximately 9% of revenue for Q1 2025, down from 10% in Q1 2024[104]. - Cost of revenue increased by $5.7 million, or 8$81.3 million for the three months ended March 31, 2025, primarily due to higher co-location costs from data center expansion[141]. - Research and development expenses rose by $6.7 million, or 20$39.6 million for the three months ended March 31, 2025, mainly due to increased personnel costs and professional services[144]. - General and administrative expenses decreased by $13.0 million, or 28$32.8 million for the three months ended March 31, 2025, primarily due to lower personnel costs related to acquisition-related compensation[146]. - Total operating expenses decreased by $5.8 million, or 6$91.8 million for the three months ended March 31, 2025[144]. Cash Flow and Investments - Net cash provided by operating activities was $64.1 million for the three months ended March 31, 2025, a decrease from$66.7 million in the same period of 2024[157]. - Net cash used in investing activities was $65.0 million for the three months ended March 31, 2025, compared to$46.4 million provided in the same period of 2024, primarily due to a $91.7 million reallocation of marketable securities to cash equivalents[158]. - Net cash used in financing activities increased to$67.2 million for the three months ended March 31, 2025, from $11.2 million in the same period of 2024, driven by$50.3 million in stock repurchases[159]. - The company believes existing cash and cash equivalents, along with cash flow from operations, will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months[150]. - As of March 31, 2025, the company had $360.4 million in cash and cash equivalents, primarily consisting of cash and money market funds[153]. Strategic Initiatives - The company released several new products in 2024, including GPU Droplets and the GenAI platform, to enhance its offerings[109]. - The company completed acquisitions of Paperspace and Cloudways to expand its AI/ML and Managed Hosting capabilities[112]. - The company is focused on increasing usage by existing customers and expanding its base of Higher Spend Customers through targeted strategies[108]. - The company plans to continue investing in infrastructure to support product portfolio and scalability of the customer base, which may affect future cost of revenue[127]. - The company approved a stock repurchase program of up to$140 million through fiscal year 2025, with $59 million spent to repurchase 1,564,254 shares in the three months ended March 31, 2025[151]. Geographic Revenue Distribution - The company serves customers across approximately 190 countries, with 37$1.0 million, or 38%, to $3.7 million for the three months ended March 31, 2025, mainly from gains in foreign currency fluctuations[147]. - Income tax expense increased by$3.1 million, or 2,638%, to $(3.2) million for the three months ended March 31, 2025, due to higher pretax income[148].